Debt Chasing – The Long Wait To Be Paid
Cash flow makes small businesses go round and without it, you have a huge challenge on your hands just to stay afloat. You probably have at some point had to face the issue of late payments – hopefully, it was not too serious, and the bill was settled within a week or two at the maximum. In all seriousness, however, things can get complicated when companies fail to pay on time, and the problem can have a knock on effect to you, your business payments and the growth of your business.
The scary thing is that a huge 24% of small and medium-sized businesses say that they have had to wait more than six months for an invoice to be paid. Thanks to data collected in a recent Sensis Business Index survey, we can see that Australian businesses are, on the whole, failing to pay their invoices promptly. While six months is at the extreme end of the situation, 63% of businesses confirm that their invoices are paid late with 65 confirming that more than ¾ of their invoices are paid late. And at the top of the late paying list; manufacturing, construction and wholesale businesses.
Late paying clients can upset the balance between client and customer and don’t be fooled into thinking that it is only small businesses doing this. Larger businesses can afford to take advantage of the smaller businesses and they are as equally as guilty in late payments.
But how can you ensure your bills are paid on time?
Offer incentives. A small discount for early payment may entice businesses to pay their bills in a timely fashion. Even as little as 5% will help speed up the process
Add late payment penalties. If they fall behind, ensure that clients understand that late payment charges will be added to their bill. Remember that 5% off for early payments we mentioned earlier; pass the bill onto the late payers so you are not out of pocket.
Send invoices out regularly. If clients know you are sending out your invoices regularly, then they are more likely to pay on time. Prompt invoicing from your perspective will mean prompt payment their end.
Follow up immediately. If your invoices are not paid on time, then send out payment reminders via electronic methods for efficiency and follow up with a phone call if necessary. They will tire of this quicker than you do.
Manners still count. Putting a please or thank you on your invoices demonstrate to your clients that you are polite. And don’t forget this fact when you are making those follow-up invoice phone calls. It is hard to remain impassive to late payers, but it is imperative you do so.
It is extremely important to keep your books up to date and track all outstanding debts on any given day. Regardless of the state of your relationship, let your clients know that you mean business from the get-go with up to date payment terms and conditions, regular billing, and invoice payment follow up procedures. This will go a long way into ensuring that your bills are paid and you don’t become a statistic, either from late payment or business closure.
For more information on bookkeeping contact Accounts Studio. Our talented staff have many years’ experience under their belt and are more than happy to assist you with your bookkeeping and finance needs.